We build a three-dimensional Kaleckian dynamic model, incorporating government-provided social common capital’s long-run stock effects and subsequent debt accumulation. We investigate how fiscal stance changes and demand and distributional impacts in a wage-led growth regime affect social common capital accumulation, economic growth, and stability. The Keynesian stability and Domar conditions are necessary for a long-run economically meaningful steady state, while a proactive fiscal stance promotes higher economic growth and a more sustainable economy. A higher wage share stabilises the economy by increasing the likelihood of satisfying the Domar condition, realising an equitable workers/capitalists income distribution, and establishing a resilient economy.
Keywords: Social common capital, fiscal sustainability, government debt, wage-led growth, Kaleckian model
JEL classification: E11 E12 E25 H54 O40
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